Fuel price hike threatens inflation in Vietnam

Prices of most popular fuels surged up to 8.5 percent, after four
consecutive hikes since the beginning of this year.

Many transport firms have raised fares after gasoline prices were hiked four
times by 6.6-8.5 percent since the beginning of this year.

The price of gasoline 95-RON increased to VND21,511 ($0.94) per liter on May
23 from VND20,090 ($0.88) on January 4, while that of biofuel E5 92-RON upped
from VND18,240 ($0.80) to VND19,940 ($0.87).

Prices of most popular fuels, 95-RON and E5 92-RON, were surged by 6.6
percent and 8.5 percent, respectively, after four consecutive hikes following
the global increase since the beginning of this year.

The new gasoline prices have pushed the fares of transport service up, said Huynh Quoc Thinh, CEO of Phu My transportation company. Fuel cost for containers and heavy trucks accounts for 40 percent of the total revenue. For other types of vehicles, the ratio is 30 percent.

"We’ll suffer from loss if we don’t increase our price,” he said.

The same price increase is seen at a transportation company in Tan Binh
district of Ho Chi Minh City, which has charged its customers VND75,000-100,000
($3.28-4.38) more for every 100 kilometers.

Nguyen Van Thanh, who owns a fruit and vegetable court at the Thu Duc
wholesale market in Ho Chi Minh City, said he has to pay VND500,000-600,000
($21.88-$26.25) more for each delivery from Da Lat to HCMC now.

The gasolines price hike might affect not only transport tariffs, but also
general consumer prices, warned economists.

“Most of the products will have to suffer a higher cost of transportation,
either directly or indirectly, and therefore, the people will have to take the
‘full force’ of this increase,” said economist Ngo Tri Long to local newspaper
Tuoi Tre (Youth).

In addition to fuel price hikes, the plan of raising environment taxes on
fuels starting in July could increase inflation and hurt businesses in the
country, warned economist.

Under a proposal of the Ministry of Finance, which is currently under review
by the Standing Committee of the legislative National Assembly, the environment
tax on gasoline will increase by 33 percent to VND4,000 per liter (17
cent).

If approved, the tax increase would raise inflation by 0.11 to 0.15
percentage points in 2018. Vietnam has set an inflation target of 4 percent for
this year.

The country's consumer price index surged 2.8 percent on-year in the first
four months of 2018, according to the General Statistics Office.